USA Funds Prepares Contingency Plans for Lender of Last Resort

USA Funds^® is updating its policies and procedures in the event it is called on to act as or designate a lender of last resort to ensure access to loan dollars under the Federal Family Education Loan Program. Federal law requires guarantors to serve or designate lenders of last resort when otherwise-eligible borrowers attending eligible postsecondary institutions are unable to find a lender willing to make FFELP loans to them.

On March 26 the U.S. Department of Education issued guidance to the nation’s student loan guarantors regarding their lender of last resort programs. The Department’s letter requires guarantors to submit within 30 days updated policies and procedures for implementing a lender of last resort program.

“We began reviewing our lender of last resort policies several months ago when it became apparent that some lenders would be suspending or terminating FFELP loan originations,” said Greg Ayers, USA Funds senior vice president, policy and administration. “We now are updating those plans in light of the Department’s recent guidance.”

USA Funds’ lender of last resort plans will address the following issues:

• Identifying lenders willing to make lender of last resort loans.
• Making system changes to prevent the guarantee of loans under the lender of last resort program when conventional FFELP loans are available.
• Outlining the circumstances that would trigger lender of last resort eligibility.
• Describing the process for reviewing and approving requests for lender of last resort loans.

“We will be ready to administer lender of last resort loans, if necessary, but we hope we won’t have to use this authority,” Ayers said.

USA Funds will share its lender of last resort policies and procedures once they are approved by the Department.